Safe and Sound

Kennebec Federal Savings and Loan Association of Waterville

Waterville, ME
4
Star Rating
Founded in 1936, Kennebec Federal Savings and Loan Association of Waterville is an FDIC-insured bank based in Waterville, ME. As of December 31, 2017, the bank had equity of $7.8 million on $92.8 million in assets.

U.S. bank customers have $65.6 million on deposit at 2 offices in ME run by 22 full-time employees. With that footprint, the bank holds loans and leases worth $82.8 million, including $83.4 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, Kennebec Federal Savings and Loan Association of Waterville exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a look at how the bank fared on the three important criteria Bankrate used to grade U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is a key measurement of a bank's financial fortitude. It works as a cushion against losses and affords protection for depositors when a bank is struggling financially. From a safety and soundness perspective, more capital is better.

Kennebec Federal Savings and Loan Association of Waterville received a score of 8 out of a possible 30 points on our test to measure the adequacy of a bank's capital, falling short of the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Kennebec Federal Savings and Loan Association of Waterville's Tier 1 capital ratio was 13.11 percent, above the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather economic difficulties.

Overall, Kennebec Federal Savings and Loan Association of Waterville held equity amounting to 8.44 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the effect of problem assets, such as unpaid loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

Having extensive holdings of these kinds of assets may eventually require a bank to use capital to cover losses, shrinking its equity cushion. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, pushing down earnings and increasing the chances of a future failure.

On Bankrate's test of asset quality, Kennebec Federal Savings and Loan Association of Waterville scored 40 out of a possible 40 points, exceeding the national average of 37.49 points.

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.39 percent of Kennebec Federal Savings and Loan Association of Waterville's loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's below the national average of 1.01 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing how large that reserve is to the total amount of at-risk loans can be a widely used indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Kennebec Federal Savings and Loan Association of Waterville's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. A bank can retain its earnings, boosting its capital buffer, or put them to work addressing problematic loans, likely making the bank more resilient in tough times. Conversely, losses lessen a bank's ability to do those things.

Kennebec Federal Savings and Loan Association of Waterville scored 8 out of a possible 30 on Bankrate's earnings test, lower than the national average of 15.12.

One important measure of a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by total equity. The most recent annualized quarterly return on equity for Kennebec Federal Savings and Loan Association of Waterville was 3.52 percent, below the national average of 8.10 percent.

The bank earned net income of $271,000 on total equity of $7.8 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.29 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.00 percent.

WHAT IS SAFE & SOUND?

Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.

Scoring methodology

Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.